It is a sad irony that what took 22 years to be made, crumbled in a span of 2 weeks. Satyam,one of the biggest IT players in India, would never be one again, not at least in its current form. The fear that is stalking every one’s mind is it an ill omen of more blood bath on corporate street, more skeletons tumbling out, more biggies taking a bow. If B Ramalinga Raju, the recipient of the Dataquest IT Man of the Year Award 2000, E&Y Entrepreneur of the Year Services award 1999, the Asia Business Leader Award 2002, and the Golden Peacock Award for Corporate Governance, cannot be trusted, who can be?

But let’s clear one thing, though Raju cheated the investors, clients, etc. he is certainly not a corporate thug out to make billions. Unlike Kenneth Lay from Enron, or Bernie Madoff, Raju claims to have been a personal fortune from the whole fiasco. The accounts being fudged at Satyam, were because of accounting indiscretion, what he referred as, “The gap in the balance sheet has arisen purely on account of inflated profits over a period of last several  years (limited only to Satyam standalone, books of subsidiaries reflecting true performance). What started as a marginal gap between actual operating profit and the one reflected in the books of accounts continued to grow over the years. It has attained unmanageable proportions as the size of the company operations grew significantly (annualized revenue run rate of Rs 11,276 crore in the September quarter, 2008 and official reserves  of Rs 8.392 crore).”

Don’t forget, Raju’s philantrophic interests, the Byrraju Foundation (that operates numerous charitable clinics, schools, hospitals in rural Andhra Pradesh), the Satyam Foundation, and the much appreciated 108 EMRI service in several states.

So, while might be very fashionable to compare the whole Satyam saga to WorldComm and Enron, it is important to distinguish between the two. The only time that Raju speaks his heart in the letter to the Board is when he says that the whole fraud exercise was akin to “riding a tiger, not knowing how to get off without being eaten.”

If that is indeed the case, then lets punish him for his follies, but lets not start a witch-hunt and demonize him. Even the mighty err, so could have Raju. The only thing that upsets me, is why didn’t Raju own up to the thing earlier, even as the things were going down he was reassuring everyone that all was good. If only he would have owned up then, B Ramalinga Raju would not have been such a maligned name, neither would have Satyam become a synonm for corporate fraud and treachery.

Two issues back, there was a news analysis written by me and published in Dataquest, here it is:

When B Ramalinga Raju founded Satyam Computer Services in 1987, he decided to name it after the ancient Indian adage ‘Satyam, Shivam, Sundaram’ that can be literally translated as “truth is supreme and hence desirable”.  Thus in essence, trust and truth were the very foundations of the company. Yet over the past fortnight or so, these two very intangibles are what Satyam, more appropriately the management, has been found lacking on.

The past 2 weeks have been the most tumultuous ones in the company’s two decade history.  In the time gone by, the company has been accused of wrong-doings, banned by World Bank, stocks nose-diving on the bourses, a director resigning from the board, calls being made for Raju to resign, government promising to look into the corporate affairs, etc. In fact much like the Murphy’s Law states; everything that could go wrong for Satyam was indeed going horribly wrong.

But that wasn’t the case sometime back, in fact in the recent H1Y (Half year) analysis done by Dataquest, the company had come out as one of the few that had actually managed to do well in the downturn. Based on its international projects on hand, the company had grown by a rather healthy 43% over H1 last fiscal.   So it was rather surprising when at a Board meeting on December 16th, Raju decided to embellish the decision to invest into Maytas Infrastructure and Maytas Properties (led by his two sons Teja Raju & Rama Raju) as a “diversification and de-risking strategy”. It would seem that the 4th largest software player in India, suddenly realised that software and IT was not all that hot and hence it needed to take an alternative route to growth.  Thus, the company announced the decision to acquire the two companies for some $1.6 billion without consulting the shareholders.

But what the management and especially Raju had not bargained for was the immediate disdain of the investors, who started dumping the company stocks in droves. Satyam stocks started to bleed and the management had little option but to decide against the proposed diversification. Within 9 hours of announcing the acquisition, the deal was cancelled in face of the investor onslaught.

A few days later in an open letter to his employees, Raju defended his decision to go ahead with the deal, stating that,” the proposed acquisition of Maytas was part of our strategy to increase Satyam’s market diversification and secure the company’s position as a leader in urban infrastructure, construction and asset development. ” What he rather conveniently forgot to mention was that the acquisition would have netted the Raju family some $570 million while exhausting Satyam’s cash reserves and driving it into $400 million of debt.

The reversal of the decision was not the end of Satyam’s woes, as almost on cue the World Bank announced that it was blacklisting the company for 8 years for corporate malpractices and the shares further tumbled. The company tried to pose strong by asking the World Bank to revoke the order, but that did not seem to work.  The company was supposed to meet on December 29, wherein it was to announce a buyback but it has been postponed until Jan. 10, in order to consider additional “strategic options.”

Speculation is rife about the future of the company, especially now that one of the independent directors, academician Mangalam Srinivasan resigned owning moral responsibility for voting in favour of the deal. There are also calls for Raju, whose family owns a mere 8.3% stake in Satyam, to quit. There is also the talk that with such depreciation on market cap, Satyam is now ripe for takeover by the likes of IBM, Accenture or Cap Gemini.

The Satyam saga still unfolds even as the story is penned; there seems to be little light at the end of the tunnel. One thing is for certain though this one false move is certainly going to affect the course of the company.  It will take a long long time for Satyam to win back the trust it had been espoused with it. For now the name Satyam seems like an oxymoron, something that represents deceit and impropriety. The affairs of Satyam are anything but Sundaram, as of now.